Air Canada has sealed a deal to buy airline and tour operator group Transat AT Inc.
Following the one-month exclusivity period for negotiations, Transat’s board of directors approved a $520-million takeover offer by Air Canada despite a higher bid from real estate developer Group Mach Inc waiting in the wings.
Air Canada said it will keep the Transat and Air Transat brands alive and maintain its head office in Montreal.
However, Air Canada still has a couple of hurdles to overcome before it takes ownership.
The deal still needs approval from two-thirds of Transat shareholders.
Letko, Brosseau and Associates and PenderFund Capital Management, which combined own more than 22%, oppose the deal at the current purchase price.
It will almost certainly spark a review by Canada’s Competition Bureau.
Air Canada and Transat will have a 60% market share of the transatlantic market from Canada, as well as a commanding presence in the Montreal market.
The companies said any anti-competition fears are misplaced.
"Travelers will benefit from the merged companies’ enhanced capabilities in the highly competitive, global leisure travel market and from access to new destinations, more connecting traffic and increased frequencies," said Air Canada chief executive Calin Rovinescu.
Still, Group Mach Inc is playing the waiting game and believes it will still have the opportunity to make an official bid.
"I think they will have shareholders who are not very happy, and ultimately it will require their approval. They accepted an offer that is inferior to the price of the market, that is inferior to an offer that’s on the table…and that comes with a risk to competition," Group Mach CEO Vincent Chiara told The Canadian Press.
